Austin, Uber, and Democracy: What Happened and Why It Matters

Austin voters recently considered some new regulations on so-called ride-sharing services, particularly a requirement that their drivers get fingerprinted. Uber and Lyft, the biggest names in this space, promised to skip town if these rules were upheld. They were. In turn the two companies made good on their word and left.

Thousands of Austinites lost their flexible jobs as drivers. Tens of thousands more lost a favorite mode of transportation. To many this shock seemed needless. To make things worse, there’s a widespread assumption that the original regulatory burden was motivated not by public safety concerns so much as by special interests – namely the Austin taxicab cartel, which has struggled with the nimble competition introduced by ride-sharing.

Others see big interests on the other end of this controversy. For example, many view Uber/Lyft’s efforts to sway the referendum – through radio advertisements, mass texts, door-to-door solicitation, and so on – as overly intrusive, often impolitic, and altogether a clear-cut case of trying to buy a democratic outcome with corporate wealth. From this perspective, the companies were, as one blogger put it, “trying to take the law into their own hands.”

That certainly introduces the fundamental problem here: how society should effect safety in private services like ride-sharing. Should safety practices be determined by governments or by corporations? By voters or by consumers? By democracy? Or by the democratic marketplace?

Most people would say, well, some combination of those things. Give companies some room to play but let government blow the whistle. That vaguely describes the present system. But many Austin locals were happier with the ride-sharing situation before government and democracy intervened. Why? Well, because the regulation and democracy inherent to the marketplace had subtly been at work all along.

Whenever you hail an Uber driver, you’re indicating a preference for that ride-sharing service over any alternative method of transportation. You’re essentially voting for ride-sharing in that form. Because your vote directly affects you, you are likely to vote sensibly, taking into account your alternatives, your preferences, your wallet, and your safety. At least, you probably aren’t being steered by corporate interests, municipal politics, or career concerns – precisely the pressures that propelled both sides of the city’s recent referendum.

So choosing market services is like casting votes in a democracy. But this sort of market democracy is much more elaborate and responsive than municipal voting. It comprehensively accounts for the public’s total demand for a service (conveyed by everyone’s voluntary payments towards it), the social burden of the service’s safety measures (conveyed by the market prices the company has to pay for them), and the costs of mistakes when safety fails (conveyed by damages and liability expenditures and lost income due to fallen demand). All these rational crowd-sourced figures fit neatly on a balance sheet, allowing service providers like Uber and Lyft to apply basic math to help decide on an optimal, efficient approach to safety.

The great classical liberal economist Ludwig von Mises called this process economic calculation. Economic calculation is a complex mechanism, but we don’t have to understand it for it to work. As citizens of society we must only appreciate that a market economy naturally seeks a balance between society’s unlimited desires, like safety, and the limited resources available to satisfy them.

Now, contrast a market’s built-in decision-making machinery with our recent municipal referendum. A majority of eligible citizens didn’t even participate; voter turnout was seventeen percent. Only a subset of this group represents the victorious proponents of regulating ride-sharing. Quite a few were confused about which side they were actually voting for. Moreover, many of Austin’s heaviest ride-sharing users – visitors and tourists, locals from outside the city limits, and those too busy to vote – couldn’t participate at all.

Why should the result of such an indirect, incomplete, and unintelligent popularity contest override the invested and nuanced decisions of the hundreds of thousands of people who chose ride-sharing in Austin over its entire lifespan in town, funneled through the elegant mechanisms of a market economy?

It shouldn’t. Government referendums are shoddy democracies. In these political spectacles, decisions are detached from practice, options are limited, participation is a nuisance and likely inconsequential, and then, after a one-time determination, the outcome is suddenly universal, absolute, and compulsory. Besides, in this case the law had already been dictated by city officials and special interests. The vote was merely an effort to diminish an illiberal decree.

In effect the municipal government has, through the very illusion of voting, taken away our ability to truly vote in the marketplace. The end result was the loss of two safe and popular services. Austin is now less efficient and less safe, and therefore poorer.

It all seems regressive. My hometown is proud of being unique, but then regulating away ride-sharing is a big step backwards. Forcing one’s judgement on others isn’t special; it’s typical. The city government’s policy falls in step with a long-established tradition of tyrants and bureaucrats who throughout history have wielded state power to enforce their own interests, the whole time professing to serve their people. When will we, the people, wise up?

Ride-sharing is innovative and new. Government paternalism, on the other hand, is getting very, very old. A final message to our municipal overlords, then: Let us decide what’s best for us. And please let Austin keep Austin weird.